It’s time to sit back, relax and enjoy a little joe …
Welcome to another rousing edition of Black Coffee, your off-beat weekly round-up of what’s been going on in the world of money and personal finance.
Okay, let’s get right to it this week …
If getting drunk is how people forget they’re mortal, then hangovers are how they remember.
— Matt Haig
Credits and Debits
Debit: Did you see this? Inflation expectations got another kick as oil climbed to a new 10-month high on Tuesday as the dollar declined. If you haven’t noticed, the price of oil has surged more than 45% since November. That helps explain why the average price of gasoline in the US is also at its highest level in 10 months — despite demand being at its lowest level since May 2020. How can that be, you ask? Two words: dollar debasement.
Credit: Meanwhile, the bitcoin craze continues, with the cryptocurrency now pushing $40,000. But wait … it gets better: Some analysts are predicting that Morgan Stanley’s aggressive expansion of, what is now, its 10.9% stake in business-intelligence firm, Microstrategy — a company with $1 billion in bitcoin holdings — may be the catalyst that sends bitcoin past the psychological $100,000 level. No, really.
Debit: And the craze isn’t limited to bitcoin. Thanks to a recent tweet from Elon Musk urging his followers to “use Signal,” Robinhood and other amateur traders jumped en masse into a penny stock for an obscure manufacturing firm known as Signal Advance, catapulting its share price from 60 cents to $38.70 — an increase of 6350%. In just three days. And if you think that’s absurd, consider this: Musk was referring to an encrypted messaging app — not Signal Advance.
don’t get mad – get E*Trade pic.twitter.com/rz90L49rsO
StockCats (@StockCats) January 8, 2021
Debit: Of course, Musk has nothing on the Fed, which has been driving stocks artificially higher for a long, long time. It’s getting so bad now that investigative financial reporters Pam and Russ Martens say they’re “convinced the allocation of $454 billion to cover any losses incurred in the Fed’s emergency (COVID) bailout programs was a dog and pony show created by Treasury Secretary Steve Mnuchin to provide him with a slush fund to trade in markets.” Imagine that.
Credit: The trouble is, these bailouts are borne out of an abject panic to save the dollar at any cost. As macroeconomist Alasdair Macleod warned this week, the Fed is trying to maintain the value of its currency by — both directly and indirectly — artificially propping up the prices of dollar-denominated assets. Unfortunately, that means just about everything these days: stocks, bonds, real estate … you name it. Well, okay … everything except gold and silver.
Asset price inflation for the rich.
Cost of living inflation for the poor.
We are from the Federal Reserve and we are here to help.
Sven Henrich (@NorthmanTrader) January 13, 2021
Debit: You can bet when that massive Fed-generated asset bubble finally does burst, the greenback’s value will rapidly disintegrate and its true purchasing power will become obvious shortly thereafter — to everyone. At the same time, that’s also when the true value of gold and silver will finally become apparent to the masses. Sadly, at that point it will be too late. Until then, the breathtaking ignorance regarding sound money will continue …
Debit: By the way, bitcoin is almost certainly in an unsustainable bubble. Only now it’s far bigger than any bubble in the history of mankind. Yes, even bigger than the infamous 17th century Tulip Bubble. In fact, if the cryptocurrency’s 2021 performance ends up similar to 2020, its market cap will be greater than all US currency in circulation. But, okay … I’m sure that’s perfectly normal. Or is it? Look and come to your own conclusion:
Credit: Then again, when it comes to bubbles, investment manager, Howard Wang, argues that bitcoin’s recent surge is only because “the global fiat system is an even bigger bubble. Investors are forced to hold $18 trillion of negative yielding government debt while trillions of dollars are being printed around the world — so drowning investors are grabbing (bitcoin) as a lifeline.” The question is: will that lifeline be strong enough to save them when the fiat system sinks?
BTC back to $40K as US Mint Gold bullion sales up 700%.
Policymakers have disabled the gold fire alarm (for now) but not the BTC fire alarm. This may put them in an uncomfortable position sooner than they think.
Luke Gromen (@LukeGromen) January 14, 2021
Debit: So … how much government debt are we talking about? A lot. Add the $8 trillion worth of US Treasuries that will mature in 2021 with at least $2 trillion that the Congressional Budget Office expects to be added to the deficit this year and we’re suddenly looking at more than $10 trillion worth of bond purchases that will need to be placed this year — and that’s just in the US. It’s more than $13 trillion worldwide.
Debit: For his part, investor Simon Black believes that although some bondholders will extend their securities, “the Fed will need to print another $3 trillion” anyway, pushing the National Debt to $30 trillion and its balance sheet beyond $10 trillion. But Black also warns if they do, “then 2021 may be the year that the world finally loses confidence in the dollar.” So … is his timeframe is correct? That’s a tough call. Maybe even a tougher call than this:
Credit: If you’re wondering why the Fed seems hellbent on destroying the US dollar — not to mention the living standard and life savings of America’s lower- and middle-classes — then ask MN Gordon because he definitely sees what’s going on here. “Make no mistake,” he says. “These are policies of desperation; a last ditch effort to preserve the status quo and let the good times roll. But for who? Not you!” Heh. No kidding.
Rudy Havenstein, Central Bank Digital Parody (@RudyHavenstein) January 14, 2021
Credit: And so the Fed-sponsored Wall Street party continues unabated; money for nothing and the profits for free. That being said, Peter Schiff is warning that, at some point, “the vast amount of liquidity reflating asset prices at the slightest downtick is fabricating a sort of stability that only breeds instability under the surface. One day, too much money will be followed by too many tears.” That it will. Let’s call it the biggest financial hangover of all time.
By the Numbers
It’s a “good” thing Congress doled out more stimulus to Americans this month because every state saw personal income drop in the third quarter of 2020 as the first stimulus package wound down. Here are the ten states that were hit the hardest. (Note: stated figures are on an annualized basis.):
10 Mississippi (-20.0%)
9 Iowa (-20.0%)
8 Arkansas (-20.3%)
7 Vermont (-20.3%)
6 Montana (-20.5%)
5 North Dakota (-20.6%)
4 Michigan (-22.7%)
3 Oklahoma (-23.6%)
2 Kentucky (-24.6%)
1 West Virginia (-29.9%)
Source: King World News
The Question of the Week
Last Week’s Poll Result
Do you plan on buying any physical precious metals in 2021?
- Yes (49%)
- No (33%)
- I’m not sure yet (18%)
More than 2200 Len Penzo dot Com readers answered last week’s poll question and it turns out that slightly more than half of them are either on the fence, or not planning to add any physical gold and/or silver to their portfolios this year. As for me, I don’t plan on buying any either; instead, I’m looking for higher returns (and taking on significant risk) by adding to my existing portfolio allocation of individual gold- and silver-mining stocks, as well as gold and silver miner and junior-miner ETFs.
If you have a question you’d like to see featured here, please send it to me at Len@LenPenzo.com and be sure to put “Question of the Week” in the subject line.
Useless News: Great News
Four people were living in a four-plex apartment building. On the first floor lived a boxer; on the second, a professional football player; on the third, a blind man; and on the fourth, a beautiful woman named Leah.
One particularly gorgeous day, Leah was in the shower when she heard the doorbell ring. So she yelled, “Who is it?” The person answered, “It’s Carson, the boxer!” So Leah exited the shower with a towel and opened the door.
“Great news, Leah!” said Carson, “I won this morning’s fight!”
Leah replied, “Well, congrats to you, Carson! See you tomorrow!” And with that she shut the door and went back to finish her shower.
Just then, she heard the doorbell ring again. “Who is it?” Leah yelled. The person behind the door yelled back, “It’s Marcel, the football player!” So Leah once again exited the shower with a towel and opened the door.
“Great news, Leah!” Marcel said, “My team won today’s game!”
“Well, congrats to you!” Leah replied. “But as you can see, I’m kind of busy at the moment. Gotta go!” She then shut the door and raced back into the shower.
As Leah began washing her hair, she thought to herself: Wow. So much good news in one day — incredible! Just then, she heard the doorbell ring yet again. Exasperated, Leah once again yelled out, “Who is it?”
This time the person behind the door yelled back, “It’s your neighbor, Eddie!”
As you might expect, Leah thought about sending Eddie away but, because he was blind, she decided to exit the shower one more time — this time without the towel, for obvious reasons. Leah then opened the door and, sure enough, there was Eddie, full of excitement. “Hi, Eddie!” Leah said. “What’s happening?”
“Great news!” Eddie said. Then he stood silent for several seconds.
“Well?” Leah said, “What is it?”
Eddie replied, “I can see now!”
(h/t: Sam I Am)
More Useless News
I currently have zero followers at Gab. That’s right; so far, I’ve only been talking to myself — which I guess ain’t all bad. But I do get lonely at times.
Len Penzo (@LenPenzo) January 11, 2021
Other Useless News
Here are the top — and bottom — five Canadian provinces and territories in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. Alberta (1.95 pages/visit)
2. Saskatchewan (1.89)
3. Manitoba (1.81)
4. British Columbia (1.78)
5. Yukon (1.67)
9. New Brunswick (1.50)
10. Prince Edward Island (1.40)
11. Nunavut (1.33)
12. Quebec (1.13)
13. Northwest Territories (1.00)
Whether you happen to enjoy what you’re reading (like those crazy canucks in Alberta, eh) — or not (ahem, all you hosers living on the frozen tundra of the Northwest Territories) — please don’t forget to:
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Letters, I Get Letters
Every week I feature the most interesting question or comment — assuming I get one, that is. And folks who are lucky enough to have the only question in the mailbag get their letter highlighted here whether it’s interesting or not! You can reach me at: Len@LenPenzo.com
Gina wasn’t too happy after reading my article explaining how to know when it’s better to buy or rent a home:
We just bought a new house. After running the P/R test you (suggested), it looks like we should have kept renting. I’m so confused!
Um, Gina … you’re supposed to do the test before you buy!
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: stock photo